For more than two decades I ran a successful public and crisis communications firm in New York City. Among the reasons for my success was I’m a chronic worrier, and I feared losing clients immediately upon them signing contracts. Regardless of their excellence, PR firms are inherently financially unstable because “nice to have” services are typically the first to be cut when a company experiences an unexpected downturn. Troubled outfits still have to pay their lawyers, accountants, and IT providers.

Although it never came close to happening, I ran my business based on the assumption that I could lose 50 percent of my revenues on a moment’s notice. This prevented me from ambitious hiring during the good times, but I’m proud that during downturns I never had to lay anyone off or ask employees to take pay cuts. I took on some modest debt only because my accountant advised me it was important for my company to establish a credit rating.

Donald Trump: Tempted Fate

If I was running an airline since Donald Trump assumed the presidency, I would have been expecting an adverse incident of major proportions to disrupt my business. Whatever your politics, it’s undeniable that Trump has been tempting fate with his tweets provoking dictators with nuclear weapons, obliterating terrorist leaders without a comprehensive foreign policy, and cutting back resources to prevent and mitigate a global pandemic. I know shit-from-Shinola about evaluating global risk, but even I had the good sense that Lady Luck was eventually going to ditch Donald Trump.

The U.S. airline industry has been living fat and happy these past few years, racking up record profits and enriching their shareholders who have profited handsomely while the flying public has endured horrific cabin conditions leading to violence and flight attendant abuse. Free market capitalists argue that a company’s primary obligation is to maximize value for its shareholders, but when the going gets tough, the shareholders get going. And this is especially true in the airline industry.

The Wall Street Journal reported today that the U.S. airline industry is negotiating a $50 billion aid package with the Trump Administration – more than three times the size of the industry’s bailout after 9/11 – to help U.S. airlines weather substantial lost business because of the novel coronavirus. According to the Journal, the bailout could include government-backed loans, cash grants or other measures, including relief from taxes and fees.

Another bailout of the airline industry is wrong on so many levels. If a company’s primary obligation is to its shareholders, then investors should be held responsible for propping up their companies when they hit a downturn. Airline investors have been feasting on higher dividend payouts for the past five years – Delta’s payout is up more than 40 percent – so let them return some of that money to protect their investments.

Airline stockholders have also benefited from share repurchase programs, which also boosts stock prices. According to Bloomberg, the biggest U.S. airlines during the past decade spent 96 percent of their free cash flow buying back their shares. Yet U.S. taxpayers are poised to protect airline investors, who understandably salivated on news of the bailout. Delta’s and United’s stock recouped some losses after the Journal’s story was published and debt-laden American Airline’s stock gained more than 11 percent.

What’s especially galling is that none of the airlines have eliminated their dividends while going hat in hand to Uncle Donald.  And guess which fabled investor will especially benefit from the taxpayer bailout? Warren Buffett, whose Berkshire Hathaway’s investments include Delta, Southwest, United, and American. (Full disclosure: I, too, will benefit because a mutual fund I own has a significant investment in United Airlines.)

These are frightening times. I’m all for government support of non-management workers of airlines and other industries adversely impacted by the coronavirus. But I’m not going to lose sleep if United Airlines goes out of business, and regardless, that’s likely not the case. Larry Kudlow, Trump’s National Economic Director, says the airlines aren’t in danger of failing but “if they get into a cash crunch, we’re going to help them out.”

Screw them. Let investors in airline stocks cough up the $50 billion. That’s chump change for Buffett’s Berkshire Hathaway, which has $128 billion in cash sitting around gathering low-yielding dust. Let me connect the dots for you in case you missed it: The Trump Administration wants to give the airline industry taxpayer money, some of which will ultimately go to the world’s third richest billionaire. Rest assured, if Buffett were to lend his airline companies money, they would be on far more onerous terms than Uncle Donald’s.

Bernie Sanders

It’s unfortunate that Bernie Sanders and his surrogates, Linda Sarsour, Alexandria Ocasio-Cortez, and Rashida Tlaib, know nothing about business. Sanders is right about advocating a “moral economy,” but capitalism doesn’t have to be overthrown to make America fair again.  We just need to stop bailing out corporations and make Wall Street feel real pain when their investments go sour.

Here in California we’re big believers in Karma. Investors who chose to profit from the airline industry’s consumer exploitations deserve the losses they were destined to sustain.

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